Mobility Matters: Sizing Up CU Wallet

Ask Jean-Albert Maisonneuve if he believes Affinity Federal Credit Union can delay taking a plunge into the uncertain waters roiling around mobile wallets, and he’ll say you have to pick a horse to even be in this race.

“The big banks obviously are going to do something. Credit unions need to start making decisions,” said Maisonneuve, vice president of marketing and e-commerce at the $2.3 billion, Basking Ridge N.J.-based institution.

Over at $8 billion Security Service Credit Union in San Antonio, Executive Vice President John Worthington said his institution signed up with fledgling CU Wallet to broaden the institution’s appeal.

“This will let us appeal to the people who live online,” said Worthington, who specifically pointed to younger members. “This will help us meet their needs.”

Important to note is that several polls have shown younger consumers say mobile tools are reason alone to switch financial institutions.

And, a mobile wallet may be the way to unlock new revenue streams, particularly from ads and offers, Maisonneuve said.

“If you are hanging your hat on interchange, you are in trouble,” he said.

Paul Parrish, chief financial officer at $719 million One Nevada Credit Union in Las Vegas, said similar. He said he expects a steady dwindling of interchange income, especially as more payments ride alternative rails, and he added he does not see any likely way to stop that.

A successful mobile wallet has to do more than just payments; plastic cards do them reasonably well.

Where can wallets dazzle? By delivering smart, location-based personalized offers and rewards to wallet users who opt in. Fees can be charged to merchants who want in. That can, theoretically, make a wallet a significant revenue creator.

There also is a large problem for credit unions who want to shift to wallets — with the possible exception of a few of the top 10 credit unions, others are not exactly deluged with sales calls from wallet merchants.

Maisonneuve, whose credit union is the biggest in New Jersey and one of the biggest in the Northeast said only startup CU Wallet pitched his shop. And, that is where Affinity decided to align.

Maisonneuve said the worst case scenario is this relationship will give Affinity a good seat for the next phase of the battle.

It’s obviously CU Wallet’s early days. The technology piece should work fine, mainly bought from Wellesley, Mass.-based Paydiant. That firm provides wallet technology to FIS, the retailer led MCX, and multiple big banks such as Capital One.

Paydiant’s tools already are fairly well tested and, by design, they are cloud based and impose no significant hardware requirements on merchants or consumers.

By contrast, Isis — the wallet initiative backed by AT&T, Verizon, and T-Mobile that got lots of buzz when announced — needs consumers to have phones equipped with near field communication. iPhone does not have it, and merchants need terminal upgrades. As a result, Isis has received scant adoption or even attention.

“Isis is dead in the water, absolutely,” payments consultant Richard Crone said

Consumers are already embracing mobile payments. The extraordinary success of the Starbucks mobile app — said by multiple experts to produce $1 billion in annual sales (a number unconfirmed by Starbucks) — has triggered an avalanche of food apps, including Dunkin Donuts, Subway, Domino's, Chipotle, Wendy's and many more.

Smartphones, too, dominate mobile in the U.S., meaning that consumer hardware will be capable.

Smartphones may not be NFC equipped, but alternative payment formats involving cloud computing, QR codes and similar technology are now known to work.

The only hang up is merchant resistance and it is difficult to say when that will dissolve.

A few years ago, many experts thought merchants would embrace the 2015 Mastercard and Visa EMV deadlines, but now pretty much no experts believe that. Javelin, for instance, is pointing to 2018 as the earliest date for reasonably wide adoption of EMV.

EMV matters because, so thought many experts, as merchants upgraded terminals to handle EMV, they would spend a few more dollars to prepare for mobile payments.

It may still play out that way, but for now merchants are sitting on their hands, and they are not paying for POS upgrades.

Over at One Nevada, Parrish knows all this but, he says, it’s also why he is comfortable with the institution’s embrace of CU Wallet. When the merchants are ready for mobile payments — and they will be, said Parrish — so will One Nevada and its members.

“We will have a wallet solution when we need it,” he said. “That’s what matters. We will be ready.”

Other credit unions have to ask themselves that question: Will you be ready when the market is?